Energy Disclosure Legislation
Burden or Opportunity?
Sustainable Solutions Corporation 155 Railroad Plaza, Suite 203
Royersford, PA 19468
Jeremy Kuhre, LEED AP BD+C
Over the past few decades, major industries such
as finance, manufacturing and retail have built
vast information system networks which enable
decision makers to extract millions of dollars of
profit via improved efficiency of their processes.
Unfortunately, the real estate industry has largely
lagged behind, leaving a significant amount of po-
tential profit on the table. Supporters of energy
disclosure legislation anticipate that increased
awareness of building energy consumption will
drive the market to modernization and increased
efficiency.
With the expansion in energy disclosure legislation
world-wide, there is growing confusion around the
subject. To date, the United States has not passed
nationwide requirements for energy disclosure in
buildings, and legislation at the state and local
level is fragmented. In order to understand energy
disclosure, and the ultimate impact of such
programs, building owners and managers need to
stay informed on the subject.
First, what is energy disclosure? At its most basic,
energy disclosure requires that building energy
metrics be made public so that stakeholders can
make valid comparisons among different
buildings – much in the same way that published
vehicle mileage allows consumers to make edu-
cated decisions about car purchases. There are
two different models for energy disclosure: asset
ratings and operational benchmarks.
Asset Ratings
Asset ratings are similar to EPA mpg ratings in
that both measure typical or as-built operating
behaviors and conditions. For buildings, this is
typically accomplished through a low-grade
energy model that uses inputs such as building
vintage, envelope design, lighting design, and
heating/cooling system design to provide some
kind of score. Actual utility data does not affect
asset ratings. Asset ratings ease building owner
concerns that unpredictable or wasteful tenant
behavior will reflect poorly on building energy
use as a whole. Examples of asset ratings in-
clude Energy Performance Certificates (UK) and
the forthcoming Department of Energy’s Com-
mercial Building Energy Asset Score (U.S.).
Operational Benchmarks
The EPA mileage label warns that actual results will vary. A lead-footed driver who does not maintain his
vehicle can certainly attest to this fact. Similarly, actual energy consumption in buildings varies widely
depending on occupancy, building hours and occupant behaviors. An operational benchmark uses actual
utility data over a specific performance period (typically 12 months) to deliver a standard metric for
comparison with similar buildings. The most popular tool for use with operational benchmarks is EPA’s
Portfolio Manager. Portfolio Manager uses utility data combined with other basic building occupancy data to
develop an Energy Use Index (EUI) and ENERGY STAR rating. The EUI is a normalized value reported in
kBTU/gross square foot of building space. The ENERGY STAR rating is a number from 0 to 100 that indi-
cates how the building performs compared to peer buildings in the Commercial Building Energy Consump-
tion Survey (CBECS, a national survey of building data conducted by the Department of Energy’s Energy In-
formation Administration).
Operational benchmarks provide an accurate representation of actual operational performance and can
identify inefficiencies that were not anticipated by an asset rating alone. This fact, combined with the
popularity of the Portfolio Manager tool, has pushed operational benchmarks as the preferred method of
energy disclosure for legislative bodies across the United States. Regardless of the approach, energy
disclosure legislation is intended to increase transparency and promote energy efficiency improvements
through market competition.
Trends in Energy Benchmarking Legislation
Rising energy costs and environmental concerns have put pressure on municipalities to reduce energy
consumption across the board. The commercial building sector is one of the largest consumers of electric-
ity in the nation and has become a primary area of focus for reduction. Some of the country’s largest cities
have enacted energy disclosure legislation to address these growing concerns.
Although each city and state has a different program in place, several similarities are apparent across most
programs. Each law designates the building type and size that will be required to benchmark and disclose
their ratings. Government, commercial, manufacturing, and multi-family facilities are typically required to
disclose energy use. Furthermore, the minimum building size required to disclose ranges from 5,000 to
50,000 gross square feet. The method of disclosure also varies among these programs. For example, some
municipalities require disclosure be made available only during building transactions; more commonly, they
will publish energy disclosure information annually via a publicly accessible database. For more
information regarding specific energy disclosure laws, refer to: buildingrating.org
The Value Behind Energy Disclosure
Building Owners and Managers
Disclosure allows building owners to promote their energy efficiency successes and
distinguish themselves from the competition. Studies have shown that buildings that
make sustainability and energy performance priorities have higher tenant retention
rates and higher rental premiums in some cases¹. The process also provides owners
and property managers the tools and insight necessary to significantly reduce operating
expenses and realize bottom line savings through improvements in energy performance.
Tenants and Lessees
Making energy efficiency data public provides another point of consideration for compa-
nies when looking for commercial real estate. Prospective tenants have the ability to as-
sess properties not only by price and amenities, but also by environmental
performance, allowing them to minimize utility costs by selecting the most energy
efficient buildings. Many organizations, such as the General Services Administration
(GSA)², have begun to set minimum energy performance requirements for potential
leases.
Governments and the Local Community
Efficiency disclosure leads to greener buildings, which have several benefits.
Sustainable buildings provide a cleaner, healthier environment and make regions and
communities more competitive in the real estate market. Progressive businesses are
increasingly looking for sustainable commercial spaces, so legislating energy disclosure
is an early step in growing the local economy. Disclosure legislation generates demand
for green jobs for the municipality as building owners perform energy upgrades. New
York City’s program alone has projected the creation of 10,000 new jobs³. Additionally,
the competition that stems from energy disclosure will drive innovation and overall en-
ergy efficiency improvements.
¹ http://www.costar.com/News/Article/CoStar-Study-Finds-Energy-Star-
LEED-Bldgs-Outperform-Peers/99818
² http://www.gsa.gov/portal/content/103656
³ http://www.buildingrating.org/content/policy-brief-new-york-city
Sustainable Solutions Corporation
155 Railroad Plaza, Suite 203
Royersford, PA 19468
Jeremy Kuhre, LEED AP BD+C
The Future of Energy Disclosure Legislation
Energy disclosure legislation is quickly proliferating across major
municipalities and progressive states. Some municipalities have even taken it one step
further, by requiring periodic energy audits. The Greener, Greater Buildings Plan in New
York City is one such example where additional legislation (Local Law 87) requires periodic
energy audits. The intent of this program is to identify equipment retrofits to foster in-
creased energy efficiency. The energy efficiency legislation in NYC is leading the way to
more vigorous programs elsewhere as municipalities feel a greater urgency to
address environmental issues. Although there are questions surrounding the role of energy
disclosure in the American City, one thing is certain – transparency in building
energy use is here to stay.
Copyright 2013 by Sustainable Solutions Corporation